Posted on Jul 31, 2023, 08:25 by Dave Toth


In 25-Jul’s Technical Blog we highlighted the Nov contract’s precarious position at the extreme upper recesses and resistance of its past 15-MONTH range amidst waning upside momentum that required the market to maintain gains above at least the 13.75-area and our short-term bull risk parameter to maintain a more immediate bullish count.  The hourly chart of Globex day-session prices does not yet reflect it, but overnight this market has broken sharply below 13.75, confirming a bearish divergence in short-term momentum that defines 24-Jul’s 14.35 high as one of developing importance and possibly the completion of what could be a major bear market correction from 31-May’s 11.30 low.  Per such, last week’s 14.35 high serves as our new short-term parameter from which traders can objectively base non-bullish decisions like long-covers and cautious bearish punts.

As always, we cannot conclude a larger-degree reversal from proof of only smaller-degree weakness like today’s failure below the 13.75-area.  Indeed, commensurately larger-degree weakness below 12-Jul’s 13.25 larger-degree corrective low and key longer-term bull risk parameter shown in the daily log chart (above) remains required to confirm a bearish divergence in momentum of a scale sufficient to break the past couple MONTHS’ impressive uptrend.  HOWEVER, the combination of the market’s recent proximity to the extreme upper recesses of its 15-MONTH range resistance and the recent spike to an 85% level in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC is a powerful one that warns of potentially protracted losses IF this market cannot now recoup last week’s 14.35 high.  While such larger-degree weakness below 13.25 remains required to mitigate any alternate bullish count and reinforce a long-term bearish count, minimally, overnight’s bearish divergence in short-term momentum certainly questions the risk/reward merits of a longer-term bullish policy “up here”.

Longer-term players are reminded that this recent price action comes within the still-arguable throes of a multi-quarter peak/reversal process that we believe is every bit as foretelling as that that warned of and accompanied 2012’s massive peak and reversal into a new secular bear market.  No, we cannot conclude a resumption of this major reversal in new-crop Nov contract prices to levels below 31-May’s 11.30 low as a result of today’s relatively minor bearish divergence in momentum.  But until and unless this market recoups last week’s 14.35 high, the resumption of this long-term bearish count should not come as a surprise.  This suggests the risk/reward metrics of an early bearish punt on such a premise are extraordinary with a risk to 14.35.

These issues considered, shorter-term traders with tighter risk profiles have been advised to move to a neutral/sideline position on the failure below 13.75 and are further advised to consider a cautious bearish stance with a recovery above 14.35 required to negate this call and warrant its cover.  Longer-term commercial players are advised to pare bullish exposure to more conservative levels and neutralize remaining exposure and reversing into a long-term bearish policy on further weakness below 14.25.


For most intents and purposes, overnight’s failure below 21-Jul’s 403.8 corrective low and our short-term but key bull risk parameter exposes a similar peak/reversal threat to that detailed above in beans.  As a result, last week’s 424.7 high serves as our new short-term parameter from which the risk of non-bullish decisions like long-covers and bearish punts can be objectively based and managed.

The daily log chart above shows the market “only” back to the middle-half bowels of this year’s range where we do not want to underestimate greater odds of aimless whipsaw risk typical of such range-center environs.  But against the backdrop of broader peak/reversal threat conditions, we likewise cannot ignore today’s gross momentum failure from the upper-quarter of this year’s range as a precursor to potentially protracted losses straight away.

The return to relatively frothy (83%-area) levels in our RJO Bullish Sentiment Index and the Dec contract’s exact 61.8% retrace of Mar-Jun’s 435 – 366 decline on a weekly log close-only basis below contribute to a peak/reversal-threat process that dates from the Feb-Mar highs.  If correct, this count warns of a resumption of Feb-Jun’s downtrend to levels below 360 with strength above at least last week’s 424.7 high and preferably above 21-Jun’s 432.6 high required to threaten and then negate.

Lastly and still, the monthly log active-continuation chart below shows the market’s rejection of the upper-quarter of its massive but lateral historical range.  Combined with a bearish divergence in monthly momentum and historically extreme bullish sentiment, it’s not hard to envision a peak/reversal threat on the scale of 2012’s.  These issues considered, traders have been advised to neutralize bullish exposure on today’s failure below 403.8 and are further advised to move to a cautious bearish stance with a recovery above 424.7 required to negate this call and warrant its cover.  In lieu of strength above at least 424.7y, further and possibly protracted long-term losses should not surprise.

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